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Bernanke On Soaring Interest Rates: "We Were A Little Puzzled By That"

Tyler Durden's picture




 

Almost exactly 8 years after Greenspan's now infamous "conundrum" comments about the unprecedented persistence of low, long-term interest rates, Bernanke is now "puzzled" at the dramatic rise in interest rates following his recent Taper remarks. Have no fear though, just as Greenspan noted, "I'm reasonably certain we would not automatically assume that it would mean what it meant in the past, " Bernanke said today that the "sharp rise in rates", was not about the Taper but "due to other factors, including optimism about the economy."

Perhaps more importantly, today for the first time someone, not Hilsenrath of course, had the guts to ask Bernanke the hardest question: is the Fed's "Stock not Flow" worldview broken, and was it wrong all along (as we have been alleging all along)? Of course, the implications of the Fed being wrong on this most critical aspect of monetary theory opens up a hornet's next of Pandora's boxes: just what else is the Fed wrong about, and how much will Bernanke be "puzzled" when one by one all of his flawed theories are revealed to be nothing but religious dogma.

And finally what happens to the BOJ when it too has to "taper" and it too realizes that it is all about the flow (in a country where the central bank is monetizing at a relative pace which is more than double the Fed's), and the second sentiment shifts, the entire liquidity bubble comes crashing down, taking not only Japan, but Europe - which is funded courtesy of the Japan carry trade - down with it?

To summarize: bonds collapsing - no worries... it's still the Stock... although not really... and optimism.

From today's press conference:

QUESTION: Mr. Chairman, you've always argued that it's the stock of assets that the Federal Reserve holds which affects long-term interest rates.

 

How do you reconcile that with the very sharp rise in real interest rates that we've seen in recent weeks? And do you think the market is correctly interpreting what you think is most likely to be the future path of the Federal Reserve's stock of assets? Thank you.

 

BERNANKE: Well, we -- we were a little puzzled by that. It was -- it was bigger than can be explained, I think, by changes in the ultimate stock of asset purchases within reasonable ranges, so I think we have to conclude that there are other factors at work, as well, including, again, some optimism about the economy, maybe some uncertainty arising. So I'm agreeing with you that -- that it seems larger than can be explained by a changing view of monetary policy.

 

It's difficult to judge whether the markets are in sync or not. Generally speaking, though, I think that what I've seen from analysts and market participants is -- is not wildly different from what, you know, the committee is thinking and trying -- as I tried today to communicate, I think the most important thing that I just want to convey again is -- is that it's important not to say this date, that date, this time.

 

It's important to understand that our policies are economic-dependent, and in particular, if financial conditions move in a way that make this economic scenario unlikely, for example, then that would be a reason for us to adjust our policy.

It's really the stock, stupid... (right?)

BERNANKE: And by the same token, as long as we're buying assets, we're adding to our holdings.

 

We do believe -- although, you know, there's room for debate -- we do believe that the primary effect of our -- of our purchases is through the stock that we hold, because that stock has been withdrawn from markets, and the prices of those assets have to adjust to balance supply and demand, and we've taken out some of the supply, and so the prices go up, the yields go down. So that seems to me consistent with the -- with the idea that we're still adding liquidity, we're still adding accommodation to the system.

 

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Wed, 06/19/2013 - 17:17 | 3673133 quasimodo
quasimodo's picture

Fail

 

Wed, 06/19/2013 - 17:19 | 3673139 Pladizow
Pladizow's picture

Id take advice from a fortune cookie over Ben!

Wed, 06/19/2013 - 17:20 | 3673148 Divided States ...
Divided States of America's picture

The savior of the financial world just got his ass reamed today....We are so FUCKED.

Wed, 06/19/2013 - 17:23 | 3673167 Oldwood
Oldwood's picture

It doesn't matter if he came out crosseyed and slobering, nobody cares if he knows what he is doing. The only thing that is important is that everyone believes that he, like his European and Japanese bretherin, will do whatever it takes, and that usually means more free money.

Wed, 06/19/2013 - 17:33 | 3673189 Pinto Currency
Pinto Currency's picture

 

 

Puzzled like a lizard on rail tracks to an oncoming locomotive.

What he means is "We don't want to talk about that or acknowledge that as a problem."

Wed, 06/19/2013 - 17:55 | 3673315 jbvtme
jbvtme's picture

i pray this guy stands trial in a state that still has the death penalty...

Wed, 06/19/2013 - 18:05 | 3673357 espirit
espirit's picture

If I have a valuable asset that I care to loan out, I can charge whatever interest the market will bear.  Problem being that there is little collateral not already hypothecated.

House of cards with cracks in the foundation.

Just saying.

Wed, 06/19/2013 - 18:11 | 3673378 toys for tits
toys for tits's picture

It's a house of cards with a sinkhole starting nearby.

(Hopefully one that will swallow, and not spit, B.B.).

Wed, 06/19/2013 - 18:22 | 3673416 Chupacabra-322
Chupacabra-322's picture

You know what Ben, I'm a little puzzled as to why you're not in a pound me in the ass Prison. Criminal.

Wed, 06/19/2013 - 19:12 | 3673551 Atomizer
Atomizer's picture

Principles of Economics - 2nd edition |by Robert H. Frank and Ben Bernanke

List Price: $158.00

Marketplace sellers starting at $3.92

Wed, 06/19/2013 - 19:21 | 3673564 Spirit Of Truth
Spirit Of Truth's picture

It's important to be careful about what "god" to place one's faith in.  Somehow "Federal Reserve Notes" seem seriously flawed in their conception and current "valuation".

http://thespiritoftruth.blogspot.com/2008/10/greenspan-i-have-found-flaw...

Wed, 06/19/2013 - 19:56 | 3673648 Son of Loki
Son of Loki's picture

"Not to worry. The problem is compartmentalized to the financial industry."

Wed, 06/19/2013 - 20:57 | 3673759 Atomizer
Atomizer's picture

Price discovery seems to rear its ugly head.

Wed, 06/19/2013 - 21:40 | 3673841 Lore
Lore's picture

I hereby nominate this young lady to take Bernank's place as new Fed Head:

MISS UTAH USA 2013 (c/o YouTube)

Wed, 06/19/2013 - 19:40 | 3673618 markettime
markettime's picture

Time for stocks to go back to thier rightful owners instead of in the hands of all the wanna-be traders. 

Wed, 06/19/2013 - 17:29 | 3673197 James_Cole
James_Cole's picture

He seems to know exactly what he's doing, sometimes I give people the benefit of bias when considering sincerity but Bernanke doesn't need that, the guy is a terrible liar. He's doing a good job though - as long as you acknowledge what his actual job is. 

Though, on the other hand people take his ridiculous statements seriously so maybe he's not such a bad liar. 

Wed, 06/19/2013 - 17:34 | 3673228 NotApplicable
NotApplicable's picture

Perhaps his goal is to completely shut down the brain of anyone paying attention?

Wed, 06/19/2013 - 17:39 | 3673254 James_Cole
James_Cole's picture

That was Greenspan's mo and considering Bernanke copies everything the saint did probably a good explanation.

Wed, 06/19/2013 - 17:51 | 3673292 francis_sawyer
francis_sawyer's picture

"The savior of the financial world just got his ass reamed today....We are so FUCKED."

~~~

The savior of the financial world just got his ass reamed today....We are one step BEYOND from BLUEBUCK slave/serfdom...

There... fixed it...

~~~

& meanwhile... & for your musical pleasure...

http://www.youtube.com/watch?v=N-uyWAe0NhQ

Wed, 06/19/2013 - 17:40 | 3673255 James_Cole
James_Cole's picture

Double post.

Wed, 06/19/2013 - 17:46 | 3673285 franzpick
franzpick's picture

Equity markets will now proceed to fill their early May and Dec 31 gaps:

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=vti&insttype=&freq=1&show=&time=7

Wed, 06/19/2013 - 17:47 | 3673287 1000 splendid suns
1000 splendid suns's picture

His goal is to stay the course of the cabal's wishes of collapsing the entire monetary system. What he struggles with is maintaining a straight face as he lies his ass off. He wouldn't find his way out of a paper bag if his puppet masters didn't want him to.

 

Wed, 06/19/2013 - 17:37 | 3673240 depression
depression's picture

Unchecked Arrogance.

Let's see how the Fed Fucks deal with $200 Oill and the 10-year yeild at 6% by Christmas.

Bond Vigilante's are back bitchez.

Thu, 06/20/2013 - 01:30 | 3674294 putaipan
putaipan's picture

having seen the losss of the dollar as the 'worlds' reserve currency" is this the collapse of the bond market of which they speak? eagerly awaiting yer' response.

Wed, 06/19/2013 - 19:58 | 3673651 Son of Loki
Son of Loki's picture

James, I have to agree with you when you understand the Fed is owned by Banks and Bankers have been handed record high bonuses since the "Great Recession" began. So, in that sense Bernanke is a huge success.

Wed, 06/19/2013 - 17:27 | 3673169 ZerOhead
ZerOhead's picture

Major fail. We are so incredibly & unbelievably fucked...

If he even thinks about taking that QE saline drip (ran out of real blood years ago...) out of the arm of the completely banked out and sucked dry consumption-based beast formerly known as the U.S. economy it's all over...

Wed, 06/19/2013 - 17:33 | 3673223 Yancey Ward
Yancey Ward's picture

We should be so lucky as to actually get fucked.

Wed, 06/19/2013 - 19:17 | 3673557 greatbeard
greatbeard's picture

>> lucky as to actually get fucked.

I'm a gold bug.  I got fucked.  How come I don't feel lucky?

Wed, 06/19/2013 - 20:04 | 3673660 Beam Me Up Scotty
Beam Me Up Scotty's picture

You haven't had an orgasm yet.  Let your wife go first.  Then its your turn to blow your load.  Then you will feel lucky.

When gold's the only thing people will trade you for food for or silver, you will feel lucky as hell.  So lucky you won't just smoke one cigarette, you will smoke a whole pack.

Wed, 06/19/2013 - 21:16 | 3673806 Droel
Droel's picture

Sorry.  Everyone got fucked today.

Wed, 06/19/2013 - 17:54 | 3673308 Panafrican Funk...
Panafrican Funktron Robot's picture

"If he even thinks about taking that QE saline drip"

Just popping back in to note that it actually doesn't matter whether he tapers or not.  

Taper:  yields go up, all manner of fun things like IR swaps/derivs blow up

No-Taper:  remaining liquidity (tier 1 capital) dries up further, bank spreads expload, "liquidity crisis 2.0"

The only way out:  Moar UST issuance by .gov.  There is only one meaningful mechanism to make that happen quickly.  War!

Wed, 06/19/2013 - 18:46 | 3673488 MiltonFriedmans...
MiltonFriedmansNightmare's picture

And the winner is.......PF, who just nailed a game winning 3 from half court.

Wed, 06/19/2013 - 18:48 | 3673491 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Sorry PF just accidentally hit the down arrow (yours is the comment of the day winner IMO)

Wed, 06/19/2013 - 19:14 | 3673553 Schmuck Raker
Schmuck Raker's picture

@ Milt - You can change your vote at any time.

Wed, 06/19/2013 - 19:54 | 3673647 YC2
YC2's picture

Yes from meaningless to another shade of meaningless

Wed, 06/19/2013 - 20:30 | 3673706 DeadFred
DeadFred's picture

If you vote red by mistake just click on the green. Since the NSA servers remember your vote they will automatically subtract one red and add a green. Sweet- and you thought the government was totally worthless!

Thu, 06/20/2013 - 01:11 | 3674269 Schmuck Raker
Schmuck Raker's picture

I wonder which particular type of cunt down arrowed me for what I thought to be a useful, helpful comment.

Operative word: cunt. (All apologies to North American females.)

Wed, 06/19/2013 - 19:06 | 3673534 EatYourCornTake...
EatYourCornTakeyourPill's picture

Why would tier 1 capital dry up though if he doesn't taper? I don't understand, isn't he giving the banks free money to buy USTs

Wed, 06/19/2013 - 21:58 | 3673885 pods
pods's picture

The scheme only works if there are new issue treasuries, otherwise the banks are slitting their own throats.

If the government actually balanced it's budget (ie austerity) this ship would be on the bottom already in a deflationary implosion not seen since the Thresher.

Our system depends on continually expanding debt to function. 

Aggregate debt must rise or shit gets icky, and quick.  With derivatives, this will blow up the system, and the banks, in a flash.

pods

Thu, 06/20/2013 - 00:31 | 3674221 SDShack
SDShack's picture

Investment Banks buy UST, repackage them to sell to investors, and sell their non-performing MBS to the Fed, which the Fed gladly buys for a premium. This allows the Investment Bank to more than offset their new money cost from the Fed with their profits from unloading their underwater MBS. This investment profit can then be used to buy stocks to keep inflating that bubble. The bottom line is there is no flow because none of the money gets circulated back into the REAL economy. Businesses are hoarding cash because no REAL loans to people or businesses are being made because the Invesment Banks can make much more shifting the pea under the various government shells.

Wed, 06/19/2013 - 20:30 | 3673701 neidermeyer
neidermeyer's picture

You're full of good news aren't you...

Wed, 06/19/2013 - 18:20 | 3673408 Sweet Chicken
Sweet Chicken's picture

I posted this in the deer in headlights thread, I'm hoping someone can help. Can anyone one please point me in the direction of an article that will help me educate someone about all of this?! I do not have a good enough grasp to do so. Thank you in advance. :)

Wed, 06/19/2013 - 19:33 | 3673606 Dr. No
Dr. No's picture

You need a Phd in Econ from and Ivy league school to understand this.  If you dont, you don't know dick.

Wed, 06/19/2013 - 19:40 | 3673619 noless
noless's picture

The thesis of the frn collapsing due to money printing.

They have been buying treasuries openly and surreptitiously, to keep the interest rate paid by the federal government artificially low, the problem is right now adjusted to inflation real yields are zero to negative.

The hypothesis is that there is no way to decelerate fed purchases of government debt, because there would be no purchaser, hence, the government couldn't find itself without outright money printing which could potentially crush the currency over night through hyperinflation (and the world economy).

A concurrent part to this is that if no one will buy the debt then the fed has to, but eventually even that won't be enough, , because if they are literally the only buyer, then its the same scenario as above., as no one will believe their dollars are real when there is no need to work for them (or maybe not, i still work, no idea why..), as the government prints money openly as handouts.

The only other option is for interest rates to rise, which will also bankrupt the government, as interest outlays quickly hamper their ability to pay their obligations (welfare, defense, pensions (which leads to a self reinforcing cycle of lower taxes and eventual hyper inflation and/or default)).

The point is that the fed has literally no options, and its only a matter of time, and interest rates rising so sharply (it might look like a small percentage, but its on trillions of dollars in debt..) Is a clear sign that they might not have as much control as the think (or pretend).

I hope that was useful.

In a nutshell, once they can no longer hide the fact that they are printing money, the entire incentive structure Of the economy based on federal reserve notes ceases to function. (that's still a pretty big part by the way)

Wed, 06/19/2013 - 21:28 | 3673823 Sweet Chicken
Sweet Chicken's picture

Thank you noless that was well written. Salute

Wed, 06/19/2013 - 22:12 | 3673914 Dingleberry
Dingleberry's picture

I can make it simpler: if the fed announces it is withdrawing from QE, it will be front run by every HFT in the known universe. No one in their right mind would hold bonds. NO ONE.  It will be such a vicious cycle down that I don't think the fed could even print fast enough to cover losses. 

Thu, 06/20/2013 - 00:55 | 3674249 prains
prains's picture

The point is that the fed has literally no options

 

option#3 = MOAR WOAR

 

this financial weapon of mass destruction does have an ending and they will control its start, hope to control its middle and disappear at its end

Thu, 06/20/2013 - 00:38 | 3674233 SDShack
SDShack's picture

Here's a long one sentence explanation...The Fed is using the Investment Banks (which are now Retail Banks + Investment Banks due to the expiration of Glass-Stegal) to EFFECTIVELY monetize the ever exponentially growing US Debt... and Bernake will swear the Fed doesn't monetize the US Debt even as he is doing it.

Wed, 06/19/2013 - 19:12 | 3673550 phoolish
phoolish's picture

Actually, I think he'll need to be increasing QE just to hold things steady (LOL - sort of - that is, hold the S&P steady while Main Street burns).  Market is fully habituated to this level of juice and is demanding MORE.

Wed, 06/19/2013 - 17:35 | 3673232 fonzannoon
fonzannoon's picture

Divided States are all the questions pre screened? Because that question was a landmine. It was a page right out of ZH book, I can't believe it got in there.

It would be funny if she asked it and before he tried to answer she said "Just kidding, my question is, how's your family?"

Wed, 06/19/2013 - 19:53 | 3673644 Dr. No
Dr. No's picture

Steve Liesman: "First, I want to say you  are doing a hell of a job.  Second, what are you doing after the press confrence?"

Wed, 06/19/2013 - 17:55 | 3673312 resurger
resurger's picture

Why are you hating on the hero who saved the world...loooool

http://globaleconomicanalysis.blogspot.ae/2012/03/atlantic-magazine-cove...

Wed, 06/19/2013 - 17:58 | 3673330 Maos Dog
Maos Dog's picture

I actually have this framed and hanging on my wall as a joke.

Wed, 06/19/2013 - 23:27 | 3674084 KnightTakesKing
KnightTakesKing's picture

I just threw-up in my mouth.

Wed, 06/19/2013 - 19:02 | 3673517 MichiganMilitiaMan
MichiganMilitiaMan's picture

Things will improve when Yellen becomes Fed Chair.  Sarc off!

Wed, 06/19/2013 - 19:06 | 3673535 yogibear
yogibear's picture

LOL, the matzo ball lady.

Wed, 06/19/2013 - 19:25 | 3673578 BeetleBailey
BeetleBailey's picture

You mean, Janet "Smellin Like Hellin" Yellen?

Janet "Geling like a Felon" Yellen?

Janet "Obamavik coochie licker" Yellen?

Janet "Printin Like a Hellian" Yellen?

That fucker?

Wed, 06/19/2013 - 19:51 | 3673639 Go Tribe
Go Tribe's picture

I have 10 beaver pelts I will trade for an axe in good condition.  Will dicker.

(Oh, and, thanks Ben for the opportunity to return to a barter subsistence economy, at least I have some muscle tone again.)

Wed, 06/19/2013 - 19:11 | 3673546 stocktivity
stocktivity's picture

It's all Bullshit!!!

Wed, 06/19/2013 - 20:08 | 3673667 Andre
Andre's picture

No, it's all Benshit!

Wed, 06/19/2013 - 21:52 | 3673877 inevitablecollapse
inevitablecollapse's picture

It's all batshit

Wed, 06/19/2013 - 22:31 | 3673963 Chuck Walla
Chuck Walla's picture

MUMBO, Meet JUMBO.

 

FORWARD SOVIET!

Wed, 06/19/2013 - 17:31 | 3673215 Gmacks
Gmacks's picture

It's going to get a lot worse. We ain't seen nothing yet.

Wed, 06/19/2013 - 17:42 | 3673271 BurningBetty
BurningBetty's picture

We've not even seen a slight correction. The SPX is at 1630, mere 55 points off the ATH. That's what, 3% down? This horse is still running upstraight...for some reason.

Wed, 06/19/2013 - 17:51 | 3673296 SAT 800
SAT 800's picture

Yeah, well, the horse is running as fast as it can, carrying the intravenous dope bag on its harness.

Wed, 06/19/2013 - 23:18 | 3674065 Bringin It
Bringin It's picture

That was funnny.

Wed, 06/19/2013 - 17:45 | 3673283 LongSilverJohn
LongSilverJohn's picture

What's there to be puzzled about Boob, er Ben? Pull a nice big boob out of a baby's mouth, and you're going to witness a temper tamtrum... It's all about boobs...

Wed, 06/19/2013 - 20:32 | 3673707 rogeliokh
rogeliokh's picture

GOLD & SILVER cowardly night take down.. Slowly and surely.

Dollar not even moving.. Taking paper down :)

Wed, 06/19/2013 - 20:52 | 3673750 mt paul
mt paul's picture

just here 

for the comments ....

Wed, 06/19/2013 - 21:25 | 3673819 Midasking
Midasking's picture

These folks are asking you to believe that if you add up all of the long list of negative numbers- debts, trade, employment, interest rates etc... it will come out to be a positive number.  May I suggest you stop listening to this nonsense and make sure you have your own ducks in a row and protected as best you can.  It isn't/can't work out in a positive fashion.  Inflation or deflation most are going broke following these idiots.  Hanging on their every word isn't going to change that fact. Use your own head... It is okay to watch it cause everyone likes a train wreck just don't count on them doing the right thing or waking up.. it is too far gone. http://tinyurl.com/mem7o7x

Wed, 06/19/2013 - 21:57 | 3673883 Dingleberry
Dingleberry's picture

Now just let your beautiful minds envision what would happen if the fed announces its exit from QE.

 

Look out below!

Wed, 06/19/2013 - 17:18 | 3673134 Stuart
Stuart's picture

for an intelligent man, he really is pretty stupid at times.

 

Wed, 06/19/2013 - 17:19 | 3673145 Zigs
Zigs's picture

Intelligence and wisdom are two different ballgames.

Wed, 06/19/2013 - 17:22 | 3673157 TheEdelman
TheEdelman's picture

Headlights are puzzling if youre a deer.

Wed, 06/19/2013 - 18:01 | 3673339 ziggy59
ziggy59's picture

Oh deer!

Wed, 06/19/2013 - 18:21 | 3673410 TheEdelman
TheEdelman's picture

2.35%10Y.. Someone give fonz two cookies.  

Wonder how the sleep index will be tonight

Wed, 06/19/2013 - 17:42 | 3673259 depression
depression's picture

Don't confuse Intelligence with Arrogance.

He actually believed he could control the world markets.

Fuck You Ben, I hope the Bond Vigilante's shove a 6% yeild up your pathetic loser ass.

Thu, 06/20/2013 - 01:43 | 3674307 RECISION
RECISION's picture

Why stop at six percent?

Wed, 06/19/2013 - 17:22 | 3673158 Scro
Scro's picture

Book smart doesn't equal common sense.

Wed, 06/19/2013 - 17:22 | 3673160 kridkrid
kridkrid's picture

He is an errand boy sent by grocery clerks to collect a bill. His intelligence is irrelevant.

Wed, 06/19/2013 - 22:05 | 3673897 Captain Willard
Captain Willard's picture

Exactly! You understand his mission. But along the way, he got a little confused and maybe thought he could dare to have thoughts of his own.

So he will now be replaced by a true believer - Ms. Yellen.

Wed, 06/19/2013 - 17:24 | 3673163 Everybodys All ...
Everybodys All American's picture

The guy has lacked a basic common sense all along. The psy ops program the business media has played has kept this nonsense going a lot longer than anyone could have imagined. Add in another con man for a president and well there you go.

Wed, 06/19/2013 - 17:25 | 3673176 The Master
The Master's picture

Intelligent?!!

 

"Well, I guess I don't buy your premise. It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis."

 

I hope you forgot your /sarc tag

Wed, 06/19/2013 - 17:20 | 3673147 azzhatter
azzhatter's picture

Oh Fuck you Bernanke

Wed, 06/19/2013 - 17:20 | 3673149 Oldwood
Oldwood's picture

I can only assume that any action will precipitate a reaction from the Fed. So its all good right? Just another BTFD opportunity?

Wed, 06/19/2013 - 17:20 | 3673150 Midasking
Midasking's picture

Let's just have the rates rise and blow this phoney economy to pieces so we can start over and get on with our lives.... Is the Fed this stupid or just plain evil?  They have killed free markets, liberty, allowed the government to grow to a tyranical size, made the masses poorer.... let the rates rise and just close the Fed down forever..please! http://tinyurl.com/mem7o7x

Wed, 06/19/2013 - 17:21 | 3673153 Joe Sixpack
Joe Sixpack's picture

Has he been seeing Miss Utah?

Wed, 06/19/2013 - 18:14 | 3673390 ebworthen
ebworthen's picture

Best knockers in the whole pageant.

Brick house.

Wed, 06/19/2013 - 18:31 | 3673445 Strut
Strut's picture

Its "Built like a brick shit-house"...

Wed, 06/19/2013 - 17:22 | 3673156 Gamma735
Gamma735's picture

Economy is always about the flow rate, never the stock.

Wed, 06/19/2013 - 17:23 | 3673165 Debtonation
Debtonation's picture

We're screwed

Wed, 06/19/2013 - 17:24 | 3673166 negative rates
negative rates's picture

Since no one is buyin 30 year bondy's (execpt the few suckers), forget that rate, and concentrate on the 10 year going where ever it leads it'self. 

Wed, 06/19/2013 - 17:27 | 3673187 Oldwood
Oldwood's picture

I might consider buying a ten DAY bond, but ten years? I might as well be buying property on the moon.

Wed, 06/19/2013 - 17:38 | 3673246 NotApplicable
NotApplicable's picture

Meanwhile anyone who does buy a ten year likely only holds it for ten days before Benron demands they sell it to him at an attractive premium.

Wed, 06/19/2013 - 17:46 | 3673284 negative rates
negative rates's picture

The interest is payable to the holder every six months, it's the sucker that has to wait the ten years to get his money. So if rates go up, bens feelin the pinch just about right away.

Wed, 06/19/2013 - 20:13 | 3673674 Al Huxley
Al Huxley's picture

They only buy because they know they can dump it on him for that premium.  That's why he can't stop the bond purchases, it will expose the fictitious nature of the 'demand for US treasuries'.

Wed, 06/19/2013 - 17:24 | 3673168 The Swedish Chef
The Swedish Chef's picture

Rising rates? Expect further QE in September, not tapering.

Wed, 06/19/2013 - 17:27 | 3673177 Everybodys All ...
Everybodys All American's picture

No. Without the Fed in the market playing buyer and seller the real market interest rates will return and those rates will be higher.

Wed, 06/19/2013 - 17:38 | 3673214 NoDebt
NoDebt's picture

Possibly yes.

But you're both missing the big flashing neon sign that popped up today.  It reads:

THE EFFECTIVENESS OF QE HAS REACHED ITS LIMIT

Let me give you some context to this:  10 Year Treasuries yields rose 6% today.  If the Dow had dropped 6% we would be off more than 900 points.  The market for US Treasuries is orders of magnitude larger than the market cap of the entire Dow.

You just lived through an historical event today.  Better to realize it early than late.

Wed, 06/19/2013 - 17:55 | 3673310 SAT 800
SAT 800's picture

Yes. I didn't watch the thingy; but it's horrible to hear that he answered that question, by "we're a little puzzled by that". Jesus Fucking Christ. What the fuck is there to be puzzled about? The market is saying fuck you, Uncle Ben and your Magic Rice; and good-bye!

Wed, 06/19/2013 - 18:01 | 3673338 Panafrican Funk...
Panafrican Funktron Robot's picture

10 year dangerously close to 2.5%; if it pops over that for more than a couple of days, we'll be queueing Jack Lew doing his best "we're totally fucked if you don't immediately authorize $3 trillion in USG spending" routine.  

Wed, 06/19/2013 - 22:10 | 3673908 Captain Willard
Captain Willard's picture

The forward yield curve for December already discounted 2.5% on the 10-year this past Monday. This is no great surprise.

Wed, 06/19/2013 - 18:01 | 3673340 depression
depression's picture

Man the lifeboats, Pimco just hit an iceberg.

Wed, 06/19/2013 - 18:19 | 3673405 toys for tits
toys for tits's picture

It's okay, they're TBTF.

Wed, 06/19/2013 - 18:45 | 3673485 NoDebt
NoDebt's picture

Not since Bill started mouthing off against the Fed.  They'll hang his narrow ass out to twist in the wind.

Wed, 06/19/2013 - 19:21 | 3673566 TheEdelman
TheEdelman's picture

Pimco drew the short straw?

Wed, 06/19/2013 - 20:00 | 3673652 noless
noless's picture

I really like their radio ads though, they make a concerted effort to say "pemco", i generally try to yell payimp(one syllable)-co, whenever they come on.

Wed, 06/19/2013 - 19:02 | 3673519 The Swedish Chef
The Swedish Chef's picture

BS. Just up the QE to the limit. The limit being the Fed being the only buyer of Treasureies. Rates down the drain. And who cares, .gov pays it´s bills with US dollars, the Fed makes them, problem solved. 

 

Monetizing the debt? We´ll monetize some Hellfire missiles on you.

 

You might laugh now, come back in two years. Five years ago you would have laughed at the current situation. Maybe you do today....

Wed, 06/19/2013 - 20:03 | 3673657 noless
noless's picture

This shit goes to 11.

Wed, 06/19/2013 - 21:04 | 3673774 Poor Grogman
Poor Grogman's picture

The balancing act just got a lot harder for the fed.

People tend to pay attention as the juggler gets more balls in the air.

Failure is certain, timing is not...

Wed, 06/19/2013 - 23:06 | 3674044 Jacque Itch
Jacque Itch's picture

THE EFFECTIVENESS OF QE HAS REACHED ITS LIMIT

I respectfully disagree.  If he would have said QE will continue and there will be no tapering in the near future the Dow and S&P would have set all-time highs today.  All he has to say is "no tapering" at any point now and stocks and bonds will charge higher.

Wed, 06/19/2013 - 17:27 | 3673190 Bay of Pigs
Bay of Pigs's picture

ding ding ding!

Wed, 06/19/2013 - 19:29 | 3673596 Pareto
Pareto's picture

+1 I think it was Knuckles who said amongst a fury of dissention to stay long bonds and gold.  Keeping it simple, keeps it understandable, keeps it real.  I agree, the taper chatter bullshit ends in September.

Wed, 06/19/2013 - 17:26 | 3673170 NoDebt
NoDebt's picture

"Bernanke said today that the "sharp rise in rates", was not about the Taper but "due to other factors, including optimism about the economy."

When Fonz said that to me earlier today we both had a good chuckle over it.  When Ben says it..... dead serious.

He's lost.  He's played his cards and now, at this late date, he fumbles for reasons to explain away what is obvious to everyone else- he's in a box.  He had so much rope to use he ended up hanging himself with it.

A common failing for academics with no real-world experience.

 

Wed, 06/19/2013 - 17:29 | 3673204 fonzannoon
fonzannoon's picture

Gold played along with the selloff today and it was just treasuries "validating" this bullshit growth meme.

The day when treasuries sell off 10% and gold rallies 10% is the day we all need to put down the keyboard and wipe out the grocery store.

Wed, 06/19/2013 - 17:36 | 3673239 NoDebt
NoDebt's picture

Agreed.  It's only moving like a commodity for right now.  "Imminent Death of the Dollar" is what would make that scenario happen.

Wed, 06/19/2013 - 17:40 | 3673257 FL_Conservative
FL_Conservative's picture

REAL gold isn't selling off, paper gold is.

Wed, 06/19/2013 - 18:29 | 3673440 SAT 800
SAT 800's picture

It's only a price change for a part of day, so far, for Christ's sake; you can't analyze it. It's paper-paper; the downwash started after the floor trading closed in New York; it's the Globex; at least let the Chinese have their say later today in Hon Kong. Nothing sells off in one day; I mean it's just not worth paying attention to. For the record if you were in a tradable market you might want to buy the dip today, but other than that, ferggetaboutit.

Wed, 06/19/2013 - 17:44 | 3673280 The Shootist
The Shootist's picture

Just dont count on the comex for gold. Why are we doing it now even?

Wed, 06/19/2013 - 18:03 | 3673351 Panafrican Funk...
Panafrican Funktron Robot's picture

Anyone else been noticing the complete lack of any movement in Comex gold stocks over the past week?  Kind of hard to believe.

Wed, 06/19/2013 - 18:07 | 3673365 depression
depression's picture

Oil trending up / 10 Year crashing

Death combo for the Fed.

I think you have what you want.

Wed, 06/19/2013 - 19:02 | 3673516 Tegrat
Tegrat's picture

how would printing more money from thin air and earning 3%-30% while fiat increases in value against paper commodities instead if 0-2% be a death combo for the recipient of the interest payments?

Wed, 06/19/2013 - 20:08 | 3673668 noless
noless's picture

Real deflation causes supply chain disruption.

Maybe you buy up entire blocks of a city, but have fun eating, or getting any farm land except through force.

If you mean to enslave the population expect extreme opposition.

Wed, 06/19/2013 - 18:13 | 3673389 kito
kito's picture

fonz, the gold price rally thing as a marker of the end doesnt make sense based on many commenters train of thought...........the rise of gold would only occur after the paper price becomes 0..........as in there is none for sale..................so if the price of gold continues to drop.....and theoretically the physcial buyers move in to swoop up gold at low prices...........and the paper price continues to get surpressed....and the paper price continues to be detached from the physical reality......we would never see a comex price rally.................it becomes available through private channels perhaps..............so help me out here.....how can the comex gold price shoot up based on the foregoing?

Wed, 06/19/2013 - 18:18 | 3673399 fonzannoon
fonzannoon's picture

I like Al Huxley. He tells me the bullion banks are net long gold. So that creates the scenario where gold explodes to the upside and the banks end up demanding the gold from the shorts who don't have the gold...so the....yeah the other guys don't have the gold....so then the comex collapses...and then....and then....and then a bunch of hot chicks come up to me and are all like....hey so you like gold.....we like gold.....and I'm all like yeah ladies!

That's how I see it anyway.

I have a 7pm appt Kito. Should I pitch stocks? Bonds? Or a balanced portfolio?

Wed, 06/19/2013 - 18:31 | 3673446 kito
kito's picture

wait fonz, so now they will allow gold to rise? shit man, im really lost now...............................watch those hot chicks................they sound like they are gold diggers....literally..................

i think you should pitch chilean inflation protection bonds.....simon black can get you a good deal...........hes got connections.................

Wed, 06/19/2013 - 19:02 | 3673521 Al Huxley
Al Huxley's picture

For me, thinking through this, there are a couple of things.  1st, its pretty clear that the people in the world with real surplus money to spend are buying physical gold in record volume, beyond annual production rates (and that's just China and India), so all this 'bear market in gold' is just either stupid or disingenous bullshit on the part of the Western financial media.  In my experience with everything else, rising demand and falling supply -> rising price.  So that's what makes me pretty damned sure the paper market's both fictitious and heavily manipulated.

 

From there, I look at the Comex, since it sets the defacto price for gold (even though they don't settle much volume).  So I look at the argument Kito makes - paper gold - 0, physical gold unavailable, and in theory it makes sense, except for a couple of things.  The bullion banks totally dominate the market, they lead, the funds follow.  So if they wanted to drive the paper market into oblivion, they'd have very little reason to be scaling back their short positions, it would be more in their interest to rally the paper price and be massively short the paper market when the eventual default occurs.  Then they win all ways - long physical gold, short paper gold, and no delivery obligation.  So why do they get net long in the paper market?

1) They're telling the truth when they say they have no position in the market, they're just taking the long side against speculative demand for short positions, and selling physical gold to stay flat.  No fucking way this is happening, since it goes counter to all the fundamental drivers in the economy, and what's happening in the physical gold market, and it would also require the bullion banks to operate in an above-board, non-manipulative, non-self-serving way, which is completely inconsistent with their proven behaviour.

2) They're long physical gold, using the price breaks to increase their physical position, drain GLD of its backing, and put the specs on the hook to settle the imbalance.  So they can blame the specs for the collapse in the Comex market, and then benefit from the explosion in the price of actual gold (which won't be the 'Comex' price any more, but there'll be a publicly established price somewhere), and probably also change the rules on the Comex settlement to require physical delivery rather than allowing paper settlement, thereby forcing the specs to not just close their paper short positions, but to SOMEHOW FIND TONS OF GOLD that the bullion banks know full well isn't available.  To me this is a more plausible scenario, because its way more consistent both with the fundamental situation in both the physical gold market and the global financial markets in general, and because it benefits the bullion banks.

Wed, 06/19/2013 - 19:27 | 3673586 Pareto
Pareto's picture

I think Jim Willie would agree.  Nice cogent argument.

Wed, 06/19/2013 - 18:25 | 3673428 SAT 800
SAT 800's picture

go away.

Wed, 06/19/2013 - 18:32 | 3673453 kito
kito's picture

hey smart guy, ive been here longer than you......you are crowding my space.............................fuck off........................

Wed, 06/19/2013 - 19:44 | 3673626 Tegrat
Tegrat's picture

Exactly. I would guess from postings of many ZH'ers lately that they have not known for years, nor will ever know that paper gold will be pushed down until there's no physical available anywhere. Prior to that period most anyone who bought for a trade thinking it could only go up, will sell. If the period of time where fiat is worthess is extended, most holding a single asset will lose to those who have a balance. 

Im not fully allocated to my ultimate PMs (due to various boating accidents) but have had (before the accidents) due to accumulation of short term nonperishables, lead, portable alt energy and actual FR notes.   I only hope to have the right mix to make it to the next phase and hope to pick a final purchase as this critical mass sells their one valuable asset for some ramen, h2o, energy etc.  I doubt anyone knows the term of the crisis, 1mo - 3.5years.

My guess is those with an unbalanced asset portfolio, ie, those who's only plan is to hold a 5-6 digits (in todays fiat) of Au/Ag will make them kings inheriting the earth WILL be the ones selling to those with a balance for a bag a ramen noodles, box of Pb or maybe a portable way to keep yourself or deer meat cool.

There's just too much else to prepare for. Misses will scoff at the relatively large purchaces of things we dont use very often (in her mind), but never mentions a word when she uses them in the rotation.

 

 

 

 

Wed, 06/19/2013 - 18:31 | 3673447 SAT 800
SAT 800's picture

People with complex portfolios had to meet margin calls and post collateral and they sold out some gold contracts; it doesn't mean anything.

Wed, 06/19/2013 - 20:18 | 3673684 Al Huxley
Al Huxley's picture

Not that many long contracts left to be sold.  At this point it might be the trend-pushing specs on the short side increasing their short position rather than closing long positions.  I'm pretty interested to see what happens at the end of the month when the delivery obligations at the Comex at least theoretically have to be met.

Wed, 06/19/2013 - 17:38 | 3673245 FL_Conservative
FL_Conservative's picture

It's like discussing business strategy with Forrest Gump.

Wed, 06/19/2013 - 18:22 | 3673414 toys for tits
toys for tits's picture

LOL.

Bernanke keeps buying more Jenny's to stimulate the economy.

Wed, 06/19/2013 - 17:44 | 3673275 NotApplicable
NotApplicable's picture

Yet this "Bernanke in a box" scenario was fully scripted, as well as fully obvious since the first chattering about QE.

 

Wed, 06/19/2013 - 17:59 | 3673335 SAT 800
SAT 800's picture

That;s horrible. it's genuinely terrifying. Our chief financial officer is delusionary. Well, I'm not worried about the recent damage to the precious metals price charts anymore; Put your money on the great white horse Silver; and the Lone Ranger will take care of the rest. Fuck Uncle Ben.

Wed, 06/19/2013 - 18:05 | 3673358 PlausibleDenial
PlausibleDenial's picture

I am in the middle of Yves Smith's book "EcoNned" and feel that I am lucky as I get to witness not only the arrogance, but also that persistent lack of reality these economist have.  It' been going on for years and it just gets moar worse.  There is actually no words for the madness.

Wed, 06/19/2013 - 18:23 | 3673423 SAT 800
SAT 800's picture

Agreed. They actually live in a parallel universe.

Wed, 06/19/2013 - 19:54 | 3673646 MeelionDollerBogus
Wed, 06/19/2013 - 17:25 | 3673175 Poor Grogman
Poor Grogman's picture

"it's not a lie if you believe it yourself"

Wed, 06/19/2013 - 17:36 | 3673238 Yancey Ward
Yancey Ward's picture

I always thought George Costanza would make the ideal Fed Chairman.

Wed, 06/19/2013 - 17:40 | 3673260 LongSilverJohn
LongSilverJohn's picture

I was thinking Kramer....

Wed, 06/19/2013 - 17:55 | 3673313 Kirk2NCC1701
Kirk2NCC1701's picture

Newman!  That Newman!

Wed, 06/19/2013 - 19:52 | 3673640 MeelionDollerBogus
MeelionDollerBogus's picture

Congressional Financial Oversight for Kramer.

You know, if he's too busy to become the Chair of the NAACP.

Wed, 06/19/2013 - 18:02 | 3673347 SAT 800
SAT 800's picture

Yeah, but that's the problem; of course he believes it; but that means he delusionary. He's living in some kind of dream world. The richest country in the world with no real problems when I got out of high school; and a succession of petty crooks and lying fools have managed to destoy the whole fucking thing; I think I'll go over to the Bar for awhile.

Wed, 06/19/2013 - 19:01 | 3673513 Treason Season
Treason Season's picture

Petty? Fools?

Wed, 06/19/2013 - 22:11 | 3673910 pods
pods's picture

This country has been doomed since the first fractional reserve dollar was issued, or at least the currency.

It has always been baked in the cake.

pods

Wed, 06/19/2013 - 17:26 | 3673178 firstdivision
firstdivision's picture

When is someone going to ask him how many shares of SPY they hold?

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